Commentary

C2.1007 Exercise of option—treatment of grantor

Capital gains tax
Capital gains tax | Commentary

C2.1007 Exercise of option—treatment of grantor

Capital gains tax | Commentary

C2.1007 Exercise of option—treatment of grantor

If an option is exercised, the grant of the option and the transaction entered into by the grantor to fulfil his obligations under the option are treated as a single transaction1.

In the case of an option binding the grantor to sell an asset (a 'call' option), the consideration received for grant of the option is treated as part of the consideration for the sale2. There is an implication that the single transaction referred to is the sale of the asset, so that the treatment of the grant of the option as the disposal of the option itself3 does not apply. This view is taken in practice by HMRC4, so that on the exercise of a call option any tax charged in respect of the grant is either set-off or repaid.

Example 1

AB granted an option to CD in May

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